If I understand your set up, it looks like your router can connect to the Internet (because the PC connected to it upstairs works). Being a router (and assuming it is propertly configured), it shouldn't matter that two computers are connected. If one connects, both should connect (again, assuming the computers are correctly configured).
Question one: Do you use a PPPoE client to access the Internet? If that means nothing to you, do you use a special program on the downstairs PC with a username and password from your ISP to access the 'net? If so, do you use the same program on the upstairs PC? Or perhaps does your router handle that for you? (Most broadband routers have built-in PPPoE clients.) Also, if so, what do you do about the Mac?
Question two: When you compare the network settings of the upstairs PC and the Mac, are there any differences? Can you describe the settings for the PC? (for example, DHCP, gateway and DNS settings).
Question three: Does your Mac have any network activity? By that, I mean:
- Do you see a link light on both the Mac and the router?
- When you open the Network Utility (in the Utilities folder), does it say your computer has an IP address?
- If you find can find out your upstairs PC's IP address, can you ping it from the Mac? (Ping is also in the Network Utility.)
- Can you see the PCs on the network?
- Can you see web pages based on their IP addresses? (For example, can you see anything when you go to http://82.165.252.92/ -- MacOSX.com's IP address, which should give you a splash page for 'digital crowd', the site's host.)
Finally, it's been a long time since I've used a hub, but I would put the router on the ground floor and run everything through it. If you are moving a lot of files between the second-floor PC and the Mac and you don't want that to affect the downstairs PC, it makes sense to keep them on their own network. If not, it might be simpler and it would certainly be safer to put the router between the modem and ALL the computers and let it do all the PPPoE authentication for you, and put the hub on the second floor. Then, you could set the computers' network settings to automatic-everything and be done with it.